Home ownership among people 25 and younger up by 69 percent

DETROIT - When most of his peers were splurging on cars, clothes and bar outings, 19-year-old Bryan McLaughlin was shopping for his first home.

"I had a bunch of money saved up, and I was looking at cars when a friend recommended I buy a condo," he said in September.

McLaughlin, a Canton, Mich., resident, skipped college and at 17 began to work 50 hours a week at an orthodontic lab and a liquor store. By 19, he had put aside more than $20,000. With the tax incentives in mind, he decided to put all of it down on a 1,440-square-foot, $180,000 condo that overlooks a golf course.

His nest egg allowed him to secure a three-year, adjustable-rate mortgage at 5.25 percent.

Home buyers

Five reasons young people are buying instead of renting:

Expectations of home appreciation.

Record-low mortgage interest rates.

Mortgages requiring little or no down payment.

Decline in discrimination by lenders has resulted in more opportunities for young, minority buyers.

Homeowner training and counseling services through public housing authorities and nonprofit firms.

Source: George Calster, Clarence B. Hilberry professor of Urban Affairs at Wayne State University

"It was actually kind of nice to settle down," he said.

McLaughlin, now 21, said that after a little more than a year, his condo has appreciated more than $10,000. "I wouldn't be surprised if I make $20,000," he said.

In a real estate market of record-low interest rates and down payments that can be waived, it's no surprise that homeownership is on the rise. During the past decade, however, the rate of homeowners younger than 25 has surpassed all other age groups. According to the U.S. Census Bureau, the rate of home owners who are younger than 25 has jumped 69 percent - from 14.9 percent in 1994 to 25.2 percent in 2004 - as teens and people in their 20s choose to own rather than rent.

Don Precour, regional sales manager for National City Mortgage, which handles McLaughlin's mortgage, said he has seen an increase in the number of younger buyers, who still account for less than 10 percent of his clientele.

"When you look at rental rates, most people are better served as homeowners," he said.

Precour said one big reason for the increase in the number of young owners is the availability of mortgage programs that require little or no down payment.

"When I bought my first home at 23, I had to put 20 percent down," Precour, 45, said recently. "With our programs, it could be ... $500 or less."

But liberal down payment options aren't the only draw for young homeowners.

When Jonathan and Angel Burt married in 2002, he wanted a house in Detroit, and she wanted a rental in the suburbs. So they applied for both, and the outcome made the decision for them.

"We couldn't get our credit approved to rent an apartment outside the city, but we got approved to own" in Detroit, said Jonathan Burt, who was 22 at the time. "It's actually kind of strange how that worked out."

Today, Jonathan Burt, 25, and Angel Burt, 26, are the proud owners of a three-bedroom bungalow. With a 20-year, fixed-rate mortgage at 8.5 percent through U.S. Bank and annual tax deductions unavailable to renters, the couple plan to live in their home for at least four more years.

According to 2004 U.S. Census figures, the majority of homeowners younger than 25 - almost 28 percent - are married.

The Burts have found, however, one down side to owning instead of renting - the absence of a landlord.

During a 2003 Super Bowl party, a guest flushed paper towels down the toilet, causing a backup into the basement and $5,000 in flood damage.

"We had to move out of the house for a month," Jonathan Burt said in September. "We really wished we had a landlord then."

Still, their home was recently appraised at $93,000, $18,000 more than what they paid three years ago.

"It's definitely worthwhile," he said of the investment.

Mark Johnson, assistant vice president and district manager of GMAC Real Estate Co., said tax deductions and equity are the major financial benefits to owning a home.

Johnson said he believes the number of mortgage clients younger than 25 is climbing, although the firm does not track its business by age groups.

"It's a lot higher than when I first started," said Johnson, who has been with the company since 1992.

While GMAC offers various down-payment options for young mortgagers, Johnson said good credit is the key to low monthly payments.